The main difference between CIF and FOB is who is responsible for the products in transit. FOB Destination means that the ownership of the products transfer from the seller to the buyer only when the goods arrive at the buyer’s location, in good condition. FOB Destination is more beneficial to the buyer, whereas FOB Shipping Point benefits the seller. For example, if a company was shipping its goods to New York City, it would be written out as FOB New York.
The seller will now take all the responsibility and risk for the safety of the goods as well as organizing all the paperwork needed to make the delivery. Destination contract, the buyer is only responsible for the costs of getting the freight fob shipping to their desired location from the final port. However, even with the standardization, international trade is still a complicated process, especially when you consider that trade laws are often very different from country to country.
Other FOB Terms
The seller will load the goods onto a ship communicated by the buyer, and the buyer clears the goods for export. Free on Board is an Incoterm that evenly splits the responsibilities between buyers and sellers.
Know your FOB options, so you can make the best decision based on each situation. For instance, https://www.bookstime.com/ if the buyer is located in Kansas, Missouri the shipping label would state FOB, Kansas.
Instead, if there is an insurable interest on board, the insurance costs are usually covered in the terms of sale. FOB shipping only applies to sea and inland waterway modes of transport in the vast majority of countries.
This means that your shipment is in the proverbial hands of the supplier through the process of transporting them to a port and loading them aboard a ship. Free on Board is a shipment term indicating the point at which a buyer or seller assumes ownership and liability for goods being transported. The term is used to designate ownership between the buyer and seller as goods are transported. If the goods are damaged in transit, the loss is the responsibility of the buyer. Incoterms define the international shipping rules that delegate responsibility of buyers and sellers.
What is FOB Destination?
Once the cargo leaves the seller’s warehouse, the buyer is in possession of the load, and can better control the successful outcome of their shipment. With FOB Origin, the seller is responsible for transporting the goods from the origin point to the shipping point. The responsibility transfers to the buyer as soon as the goods are loaded onto the nominated shipping vessel. The buyer takes responsibility for the remainder of the transport, including the delivery to the destination port. While shipping costs are determined by when the buyer takes ownership of a particular order of goods, a company’s accounting system is also impacted. If a shipment is sent FOB Shipping Point (the seller’s warehouse), then the sale is concluded as soon as the truck pulls out of the seller’s loading dock and is noted in the accounting system as such.
How FOB Shipping Point Affects the Buyer?
Clearly, FOB shipping point compels the buyer to make an upfront payment before shipping goods.
At the same time, the incoterm enables the importer to order for goods to be delivered to their designated port.
They don’t have to be present in person when the consignment is finally delivered.
When ordering for goods, the buyer gives their billing details to the seller before the order is processed.
As soon as the supplier starts shipping the cargo, the purchaser is billed for it.
Since the transaction is already complete, it is not mandatory for the buyer to be there to accept the shipment from the deliverer.